Rising pension costs 'crisis' in Palm Springs could lead to higher recreation fees and more

The California Public Employees' Retirement System is the largest public pension fund in the country. A couple handy terms you should know.

Richard Lui/The Desert Sun

Rising pension and healthcare costs have Palm Springs exploring austerity measures not seen since the Great Recession.

In an attempt to bring down the city's massive unfunded liabilities, City Council member Geoff Kors proposed on Wednesday night that officials set aside an extra $6.5 million every fiscal year over a six-year period.

After some debate, the council decided to establish a new fund for future pension and retiree healthcare costs and to immediately transfer $3.25 million from reserves. The other $3.25 million will possibly come from cuts and new sources of revenue, including fee increases for any number of city services ranging from after school programs to golf courses.

In the event of emergencies, the council could dip into the new pension fund for other uses.

City manager David Ready was given until late October to find the money, starting in this fiscal year, and was instructed to begin thinking about how to find the money in subsequent budgets.

The council approved its $109.2 million 2017-18 fiscal year budget, which begins July 1, with a vote of 4-0. Council member Chris Mills was absent.

Over the next several decades, Palm Springs owes $110 million to pensioners and $107 million in retiree healthcare costs, an amount greater than all the other cities in Coachella Valley combined. The city employs more people than most cities in the desert and runs an airport, police and fire departments, and a no-kill animal shelter.

"We are going to have make some decisions," said Kors. "We are a very high-service city. And we do a lot of things many cities don’t do."

The Buzz trolley heads through downtown Palm Springs in December 2014.

The Buzz trolley heads through downtown Palm Springs in December 2014.

In the last recession, the California Public Employees Retirement System lost about 40 percent of its assets. To prevent such wild fluctuations in the future, the CalPERS board has decided to increase the amount of money that governments contribute every year, which will only put more stress on Palm Springs going forward.

The city estimated Wednesday that by fiscal year 2022-23 its annual pension and retiree healthcare obligations would rise to $25.6 million. Not counting the new $6.5 million fund, Palm Springs is planning to spend $17.2 million in the next fiscal year.

Kors argued that the city could not keep pushing the matter down the road and that it needed to make difficult decisions now — for the sake of its residents and employees in the near future.

“It is a crisis,” Kors told his fellow council members.

Roberts agreed. “This is a dark train coming down the tracks that is eventually going to land at the station and explode," he said.

"This is a huge problem.," said council member Ginny Foat. "This is the kind of problem that put cities into bankruptcy.”

But perhaps where to find the real savings is exploring some of the city’s most costly perks like the Buzz trolley and two city-owned golf courses. The Buzz’s annual costs to taxpayers is nearly $900,000, and the golf courses operate at a deficit of more than $1 million a year.

The door could be opened to adding rider-fares to the free Buzz or even eliminating the service altogether.

“I want to go after the bigger stuff,” Roberts said. “I love that we’re looking at the Buzz. Make the Buzz make money or get rid of it.”

Mayor Robert Moon suggested raising golf course user-fees to make them cost-neutral.

“We’re never going to make that up in raised fees. We’re now going to have to think about, ‘owning a golf course.’ It’s the elephant in the living room,” said Roberts.

“There’s a handful of things that are strangling us right now,” he added. “And that’s where that $3 million is hiding that we’re looking for right now.”

Reach Skip Descant at edescantjr@palmspri.gannett.com and Jesse Marx at jesse.marx@desertsun.com.